DISNEY: LOSING MAGIC IN THE MIDDLE KINGDOM
Hong Kong Disneyland will provide guests with an immersive experience to re-ignite “the magic that is the Disney storytelling tradition”. The park will act as a springboard for our other businesses throughout China and the region.
- Andy Bird, president of Walt Disney International, August 20051
Three years after itsopening in September 2005, Hong Kong Disneyland had yet to gather sufficient momentum to catapult its attendance rate to a satisfactory level. Despite high expectations of it as a cash-cow tourist attraction, things had turned rocky, with a series of negative media coverage both before and after the launch. The park suffered a major blow after a ticketing hiccup during the Chinese New Year in February2006, when many mainland tourists with valid tickets were barred from entering due to overcrowding, causing a chaotic scene in front of the TV news cameras. The attendance rate declined rapidly thereafter. Even though tremendous effort was made to lure back the crowd, no spectacular improvement was recorded. Factors such as the park’s small size, inconvenient location, lack of unique features,insufficient appeal to adults and missing Chinese elements were cited as possible causes. The poor financial performance had attracted much public attention, since the government owned a 57% stake in the park. In 2008, the Walt Disney Company (“Disney”) was negotiating with the Hong Kong government for additional capital injection to build more attractions. However, it was imperative for themanagement to find out what went wrong in the first place, and what should be done to turn the tide.
Landreth, J. (31 August 2005) “Hong Kong Disneyland Opens with Wealth of Challenges—Mouse Meets Mao”, Hollywood Reporter, http://www.hollywoodreporter.com/hr/search/article_display.jsp?vnu_content_id=1001051279 (accessed 11 June 2008).
Penelope Chan prepared this case under the supervision ofProfessor Ali Farhoomand for class discussion. This case is not intended to show effective or ineffective handling of decision or business processes. © 2010 by The Asia Case Research Centre, The University of Hong Kong. No part of this publication may be reproduced or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise (including theinternet)—without the permission of The University of Hong Kong. Ref. 09/419C
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Disney: Losing Magic in the Middle Kingdom
The Theme Park Industry and Disneyland
In 2006, theme park entertainment was a US$22.8 billion global industry. The industry was expected to grow at a 4.6% compound annual rate between 2007 and2011, with estimated revenue of US$28.5 billion in 2011. Disney was one of the major global players in the entertainment and leisure industry. In the financial year ended 30 September 2007, the Parks and Resorts division of the company generated revenue of US$10.6 billion and a net income of US$1.7 billion, representing 30% and 22% of the total figures for the company, respectively. As of 2008,there were five Disney resort locations on three continents, encompassing 11 theme parks. Five of them were Disneyland parks [see Exhibit 1]. The first Disneyland theme park was built in Anaheim, California in 1955. It offered a wide variety of attractions based on themes, such as Tomorrowland and Fantasyland. These attractions ranged from thrilling rollercoaster rides to parades and boat trips.Disneyland was positioned as a theme park for the entire family. The cartoon characters Mickey Mouse, Donald Duck and Snow White, as well as the park’s Cinderella Castle, were its popular icons. After great success in Anaheim, Disney launched the Magic Kingdom in Florida in 1971. In 2007, the Magic Kingdom attracted 17.1 million visitors and topped the global ranking of theme parks in terms of...